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Journal of Agricultural and Applied Economics >
Volume 41, Number 03, December 2009 >
Please use this identifier to cite or link to this item:
http://purl.umn.edu/56647
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| Title: | Lump Sum versus Annuity: Choices of Kentucky Farmers during the Tobacco Buyout Program |
| Authors: | Pushkarskaya, Helen N.
Marshall, Maria I. |
| Keywords: | annuity
family business system
intertemporal choice
lump sum
tobacco
buyout |
| JEL Codes: | G11
H31
J10 |
| Issue Date: | 2009-12 |
| Abstract: | Our study uses the data collected during the implementation of the tobacco buyout program in
Kentucky to evaluate how rural households, diverse in income, age, family structure, location,
education level, and other characteristics, made a choice between annuities and a lump-sum
payment. Subjects in our field experiment did not have to retire or change their employment, as
did subjects in many field studies of the choice between annuities and lump-sum payments,
which allowed us to evaluate the relationship between the option choice and a decision whether
to exit the tobacco market. Our results suggest that while discounted utility theory gives acceptable
predictions of the farmers’ behavior, other factors have to be taken into consideration.
First, there are consistent biases that describe individual intertemporal behavior, such as
availability bias or acquiescence bias. Second, there is a certain degree of heterogeneity in
individual intertemporal preferences that correlates with their personal characteristics, such as
education and production status. Third, our analysis revealed that the decision to exit the
tobacco market positively correlated with the decision to take a lump-sum payment. |
| URI: | http://purl.umn.edu/56647 |
| Institution/Association: | Journal of Agricultural and Applied Economics>Volume 41, Number 03, December 2009 |
| Total Pages: | 12 |
| From Page: | 613 |
| To Page: | 624 |
| Collections: | Volume 41, Number 03, December 2009
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| jaae178.pdf | | 549Kb | PDF | View/Open |
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